Editor's note:
Though this paper was written on August 25, 2014, it still has reference significance on how to cope with the current wave of anti-globalization.
Main Body:
It is not news that China is the "world factory", but the "Chinese market" is still news for the world. Many westerners still seem to believe that China, which has a low level of consumption and a high savings rate, can only be a country that relies on cheap labor to produce low-priced industrial goods and is unrestrained in competition; its position in the world is determined by labor and massive exports, rather than its market size and consumption.
From the perspective of geopolitics, since the end of the Cold war, the original bipolar world has rapidly collapsed and formed a unipolar world (refer to the "Daily Economic Briefing" of Anbound during the 15th National Congress of the Communist Party). Under this condition, global productivity, efficiency, and the progress of globalization improve significantly and hence create a lot of wealth for the world. Also, in this wave of globalization, China's southeast coast became the Gold Coast region in the eyes of the world geopolitics; the potential of the Indian economy has caused widespread attention and the ASEAN and Latin America's economics were benefited from this wave of globalization. Most importantly, the BRICS countries and economic rising stars are seeking the market to export their products, the introduction of capital, that is to say, China will become a good example of wealth creation in this globalization and the rest of the third world countries will strive to become the "world factory". At this point in time, China will become a real "buyer's world".
One problem in this "buyer's world" is that the channels for the competition are too narrow or even overcrowded. In such a world, the most valued thing is the size of the economy and its purchasing power, rather than the cheapness and variety of goods. That is to say, what can be said and to be decisive is the total strength of consumption in China. If China continues to engage itself in low-price competition in the global market, it will definitely face competition with the third world countries in the near future, China would face numerous competitors and there will be fewer partners willing to cooperate with China, which is the obvious outcome.
How to solve this problem?
The concept of "Chinese market" is an important solution and approach in addressing this issue. In fact, Chinese President Xi Jinping has clearly revealed the concept of the "Chinese market" in his keynote speech at the Boao Forum for Asia annual conference in 2013, whereas the Chinese economic sectors have not yet realized and followed up. Xi pointed out that in the next five years, China will import about USD $10 trillion worth of goods, its scale of foreign direct investment will reach USD $500 billion and the number of outbound tourism will exceed 400 million. This is a clear strategic picture that needs to be clearly understood by the Chinese government departments and the business community.
In 2009, China surpassed Germany in both exports and imports of goods to become the world's largest exporter and second largest importer that year. In 2010 and 2011, China and the United States maintained the positions of first in export, second in import and second in export and first in import respectively, while the United States maintained the "crown" of first in total import and export value. However, according to the 2012 trade data, China has made a leap forward and established the global status that overtaking the United States as the world's largest trading country of goods in terms of total value of imports and exports. That is to say, since then, China has become one of the largest buyers in the world, which is of great significance in the buyer's world.
If that is not enough, one can look further at the economic capacity and dynamism of the Chinese market.
First, China is the largest US creditor nation which holds USD $1.13 trillion of U.S. treasury bonds, besides, the U.S. treasury bonds generally have a great influence on the performance of long-term interest rates in the United States. Second, the profits of foreign enterprises in China have reached USD $200 billion over the past decade. Take General Motors as an example, its international division is one of the few profitable divisions, but half of its profits come from China. Besides, China is also the largest market of many foreign enterprises such as German Volkswagen. Third, the total profits of 181 foreign banks in China grew rapidly, from RMB 7.78 billion to RMB 16.73 billion within 2010 to 2011, meanwhile, the total assets of foreign banks have increased by 24% to RMB 2.15 trillion. Fourth is the great value of foreign investment in China. According to incomplete statistics, from 1979 to 2008, foreign capital has invested about USD 850 billion in China. Fifth, the value of foreign-owned assets in China has soared. According to incomplete statistics, the 500 largest foreign-owned assets in China have exceeded RMB 2 trillion. Perhaps it can be said that the Chinese market nowadays has a significant impact on western important sectors such as automobiles, pharmaceuticals, aircraft, and financial assets.
How to understand "Chinese market"?
The biggest problem facing China nowadays lies in its ability to understand the market and coordinate strategies. Without a top-level understanding of the "Chinese market", there would be no strategic route and planning for the "Chinese market". "Everything that China wants to buy will become expensive", China is the largest buyer of iron ore in the world, whereas, it has been pushed up the price of iron ore before China purchasing large sums of iron ore. This is the best manifestation of China's lack of strategic planning. Interestingly, even after the China's macroeconomic regulation and control, global iron ore prices plummeted and resource producing countries suffered heavy losses, Chinese authorities did not grasp the opportunity to emphasize the value of the "Chinese market". This exposed the serious lack of strategy and the sectorial coordination in China.
In fact, the concept of the "Chinese market" has implications far beyond the economic sphere. Containment against China is a hot topic in western politics, but in the sense of "China market", the Obama administration may have underestimated the huge strategic risks of "Pivot to Asia" policy and the China containment policy. On the South China Sea issue, China and ASEAN countries were once in a state of tension. However, China actually has a deficit with ASEAN countries, Taiwan and South Korea. If market sanctions are adopted, the impact on mentioned countries will be huge.
Of course, there is still a long way to go before the concept of "Chinese market" can take shape and play out in China's strategic operation. In addition to the problem of understanding and strategic coordination, there is still a lot of institutional construction to be improved. However, having gone through the process of joining WTO, China actually has its policy capacity to systematically promote institutional building. As long as China has a clear understanding, the implementation of the policy roadmap is by no means out of reach.
Final analysis conclusion:
China's emergence as one of the largest country in the buyer's world depends on the world, globalization, and more on our own understanding.
